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In the past three months, three telecom giants received unexpectedly heavy fines from the Hungarian Competition Authority (HCA) in consumer protection cases. In 2019 the HCA imposed more fines in total for unfair commercial practices against consumers than in cartel cases and, on the basis of its recent decisions, it looks likely to do the same in 2020. These recent decisions also show that repeated infringements are now subject to a stricter assessment and will likely rule out commitments and a substantial fine reduction.
In its first decision dated 28 January 2020,1 the HCA concluded that by using the phrase 'maximum speed' in an ad campaign, Magyar Telekom falsely suggested that it provided all customers with the highest available speed on its network. The HCA established the infringement and imposed a fine. In doing so, the HCA considered the fact that Magyar Telekom had committed similar unfair and unlawful commercial practices against consumers on four occasions in the past 10 years. Each of these prior infringements entitled the HCA to increase its fine by up to 100%. However, the HCA decided only to double the amount of the original fine, resulting in a fine of approximately €1 million.
After the HCA commenced the proceeding against Magyar Telekom, the company offered to undertake commitments consisting of compensating harmed consumers. However, the HCA concluded that the commitments would not provide full compensation to consumers and that the estimated amount of the offered commitments could therefore not be deducted from the fine. The HCA also stated that it could not refrain from imposing a fine due to the repeated infringement. However, as compensating harmed consumers is as important in consumer protection cases for public interest as imposing a deterring fine, the HCA imposed a multi-stage, conditional fine for the first time in its practice. Thus, Magyar Telekom had to pay only approximately €300,000 within 30 days. If within 120 days the company evidences the fulfilment of its commitments, the HCA will waive the remaining €740,000 fine. Therefore, provided that Magyar Telekom opts to fulfil its commitments rather than paying the remaining fine, the fine imposed by the HCA will be retroactively reduced in practice by €740,000.
Notably, less than three weeks later,2 Magyar Telekom was found guilty by the HCA for omitting substantial pricing information in its ads; the company had failed to inform consumers that if they chose to obtain a mobile device at a discounted price or for free with the subscription contract, the monthly subscription fee would be higher than absent the device. Again, since this was a repeated infringement that violated consumer rights, Magyar Telekom received a significant fine of approximately €2 million. For similar infringements, the HCA charged Telenor approximately €5.45 million in December 2019 and Vodafone approximately €600,000 in 2017.
In the latest Vodafone case, the HCA established that Vodafone had falsely claimed that it was the market leader in terms of 4G network coverage in Europe.3 Vodafone was unable to support such a statement with evidence. While Vodafone also tried to offer commitments in order to avoid or at least substantially reduce the fine, the HCA refused to accept such commitments. The HCA refused not only because the commercial practice had wide-reaching effects, but also because Vodafone had been repeatedly fined on multiple occasions for false claims relating to its market leader position.
When setting the amount of the fine, the HCA considered that Vodafone had engaged in 12 unfair commercial practices against consumers in the past 10 years, three of which explicitly related to falsely claiming a market leader position. These repeated infringements resulted in a 380% increase of the fine imposed on Vodafone, resulting in a fine of approximately €3 million. However, the HCA stressed that, in theory, it could have increased the fine by 1,200%.
Although the HCA frequently strives to cooperate with investigated companies in order to achieve quicker, more efficient proceedings, repeated infringements force the Hungarian watchdog to impose heavy fines to deter companies from further wrongdoing.
The multiplicator for a repeated infringement does not take into account the fine imposed for the previous infringement – for example, an infringement from two years ago with a negligible fine can nevertheless double the fine imposed in a new proceeding for repeated infringement.
These fines clearly evidence the importance of a well-structured competition compliance programme which helps to educate employees and prevent companies from committing repeated anti-competitive behaviour.
1 HCA decision in VJ/24/2018.
2 HCA decision in Vj/21/2018.
3 HCA decision in VJ/76/2016.
This article was first published in International Law Office